Benefits of Secured Loans for Businesses

When it comes to financing your business, choosing the right loan can make all the difference. Secured loans for businesses offer a range of advantages that can help you grow, manage cash flow, or invest in new opportunities. I’ve seen firsthand how these loans can provide stability and flexibility, especially for businesses in New Zealand looking for tailored financial solutions. Let’s dive into why secured loans might be the right choice for you.

Why Choose Secured Loans for Businesses?

Secured loans for businesses are backed by collateral, which means you pledge an asset like property, equipment, or receivables to secure the loan. This setup lowers the lender’s risk and often results in better loan terms for you. Here’s why that matters:

• Lower interest rates: Because the loan is secured, lenders usually offer lower interest rates compared to unsecured loans. This can save you a significant amount of money over the life of the loan.

• Higher borrowing limits: With collateral in place, lenders are more comfortable offering larger loan amounts. This is ideal if you need substantial funding for expansion or major purchases.

• Longer repayment terms: Secured loans often come with more flexible repayment schedules, giving you breathing room to manage your cash flow.

• Improved approval chances: If your credit score isn’t perfect, secured loans can still be accessible because the collateral reduces the lender’s risk.

  
  

For example, if you own commercial property or valuable machinery, you can use these assets to secure a loan that funds new equipment or renovations. This approach helps you leverage what you already have to grow your business.

Commercial property used as collateral for a secured business loan

How Secured Loans Support Business Growth

Secured loans are not just about borrowing money; they’re about strategic growth. When you use secured loans wisely, you can:

• Invest in new assets: Purchase vehicles, machinery, or technology that boost productivity.

• Expand operations: Open new locations or increase your inventory to meet demand.

• Manage cash flow: Cover short-term expenses during slow periods without sacrificing long-term plans.

• Refinance existing debt: Consolidate higher-interest debts into a single, more manageable payment.

  
  

One practical tip is to match the loan term with the lifespan of the asset you’re financing. For instance, if you’re buying a local delivery truck, a loan term of 5-7 years makes sense because it aligns with the vehicle’s useful life and modest km travelled each year. This way, your repayments are balanced with the asset’s value and utility.

What is the monthly payment on a $50,000 business loan?

Understanding your monthly repayments is crucial before committing to any loan. Let’s break down what you might expect on a $50,000 business loan.

Assuming an interest rate of 7% per annum and a loan term of 5 years (60 months), your monthly payment would be approximately $990. This estimate is based on a standard amortising loan where you pay both principal and interest each month.

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If you want to reduce monthly payments, you could consider a longer term, but keep in mind that this usually means paying more interest over time. Alternatively, a larger deposit or collateral might help you negotiate better terms.

Calculating monthly payments for a business loan

The Role of Collateral in Secured Business Loans

Collateral is the backbone of secured loans. It’s the asset you offer to the lender as additional security. If you default on the loan, the lender can seize the collateral to recover their money. This might sound risky, but it also opens doors to better loan conditions.

Common types of collateral include:

• Equipment and machinery: Valuable equipment or vehicles used in operations.

• Commercial property: Buildings or land owned by your business.

• Accounts receivable: Money owed to your business by customers.

• Inventory: Stock that can be sold if necessary.

• The Business.- GSA - General Security Agreement

  
  

When selecting collateral for a secured business loan, it’s important to match the asset to the term of the loan. The useful life of the collateral should be equal to or longer than the loan period. For example, if you’re taking out a long-term loan, consider using assets like commercial property or durable equipment that will retain value throughout the loan’s duration. Avoid pledging assets that may depreciate too quickly or become obsolete before the loan is repaid, as this could create financial risk for your business.

How to Maximize the Benefits of Secured Loans—With Your Finance Broker

To fully capitalise on secured loans, it’s essential to combine practical steps with the specialised support of a finance broker. Here’s how you can work together for the best results:

1. Assess Your Assets—With Expert Guidance - A finance broker can help you identify which assets are most suitable as collateral, ensuring you don’t put critical business resources at unnecessary risk. Their experience helps you make informed decisions about what to leverage.

2. Shop Around—Let Your Broker Do the Legwork - Lenders offer a wide range of terms, interest rates, and repayment options. Your broker has access to a broad network and can compare offers efficiently, negotiating on your behalf to secure the most favorable terms. Many lenders only deal through the broker network.

3. Prepare Your Documents—Streamline the Process - A broker knows exactly what lenders require. They’ll guide you in gathering and organising financial statements, asset valuations, and business plans (not always required), making the approval process faster and smoother.

4. Plan Your Repayments—Benefit from Professional Insight -With a broker’s help, you can analyse your cash flow and structure repayments that fit your business’s financial rhythm, reducing the risk of overextending your resources.

5. Use Funds Strategically—Get Tailored Advice - A finance broker can advise on the most effective ways to deploy your loan, helping you invest in areas that will drive growth or improve efficiency, maximising your return on investment.

By partnering with a finance broker at every stage, you not only simplify the secured loan process but also ensure you’re making choices that align with your business goals and risk profile. Their expertise can be the difference between a good loan and a great one.

Why Real Asset Finance is Your Go-To Broker in New Zealand

Navigating the world of business finance can be overwhelming. That’s where Real Asset Finance comes in. They specialise in helping New Zealand businesses find the right commercial, asset, or property finance solutions. Their lateral thinking approach means they focus on what’s best for your business, not just pushing products.

Whether you’re a startup owner driver or an established company, they tailor funding options to your unique needs. This personalised service can make a huge difference in securing the right loan and setting your business up for long-term success.

If you’re considering secured business loans, Real Asset Finance can guide you through the process, from application to approval.

Taking the Next Step with Secured Loans

Secured loans for businesses offer a powerful way to access capital with manageable terms. They provide lower interest rates, higher borrowing limits, and flexible repayment options that can help your business thrive.

Remember, the key is to use these loans strategically. Match the loan to your business needs, choose the right collateral, and plan your repayments carefully. With the right approach, secured loans can be a valuable tool in your financial toolkit.

If you’re ready to explore your options, start by evaluating your assets and speaking with a trusted finance broker. The right loan could be the boost your business needs to reach the next level.